The New Year Holds Hope And Promise For Startups. Happy 2021!

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As we ring in 2021, we reflect on the end of a historical year. 2020 was a time of massive turmoil where our culture, careers, families, friendships, emotions, and, in fact, our entire lives were upended in ways no one could have imagined nor predicted.  

Over the next few weeks, the postmortem of this chaotic year will begin. We will try to make sense of everything that happened and work to chart a way forward. That’s why I wanted to take a look back at this year for startups. While many businesses certainly struggled, numerous entrepreneurs looked at the challenges of 2020 and refocused their businesses to support new norms. They not only created or grew successful businesses; they helped us survive the most challenging year on the planet in recent history.

Initial shock

2020 began with lots of promise and hope. The economy was booming, and funding for entrepreneurs was at an all-time high. At the end of 2019, I predicted the next decade would see major healthcare innovations, the sharing economy, and 5G communications. Momentum was strong, and it looked like these predictions would start coming to fruition. Then the pandemic hit. After the initial shock, startups worldwide pulled out their “Plan B” books and began to shift business plans. Companies that quickly got out the door with pandemic-ready solutions won and created a new digital economy for virtual connectivity.  

Reality

As the economy crashed and signs pointed to a long-haul battle against COVID, it became evident that the bar for business survival this year would be high. If a business plan worked, the company could survive. If it had any flaws, the company stood no chance to try again. If a company provided opportunities for people to work, stay connected, and learn from home, the demand for its products and services skyrocketed. If the business relied on in-person transactions, it faced a massive reduction in revenue and potential closure.

At this stage, some startups simply didn’t survive. Others that had funding had to delay their go-to-market plans, which meant they needed more cash. The Paycheck Protection Program (PPP) Loan Forgiveness helped many startups, but it wasn’t the ultimate solution. VCs were also actively helping promising companies in their portfolio.

Light at the end of the tunnel

One of the most surprising and positive things that came out of 2020 was the growth of VC funding. VC investment in startups nationally and globally was robust in 2020 despite the massive downturn of the economy. In fact, through just Q3 of 2020, U.S. VCs invested over $56 billion in startups (the entire VC investment funding in 2019 was $54.9 billion, according to Pitchbook).

That great news comes with a bit of a caveat, though. Most of the funding went to established startups or well-known entrepreneurs. While more money was spent on existing companies, VCs were very conservative on new deals. Still, VCs have been working non-stop to meet the market demand and invest in quality companies.

Hope

As the year comes to an end, changes that were once thought to be only temporary are now trending towards the new norm. The pandemic forced us to work at home – with no business travel or commute to work. As a result, we had more time for self-development and family—and employees and companies are both realizing there may be no going back from this. Major technology companies like Facebook and Google have instituted work from home for the foreseeable future. I don’t think this will change even with the vaccine. 

Work from home has opened up a new opportunity for companies—the ability to leave dense cities and relocated to less-expensive, less-populated areas. Since a growing number of employees can work remotely, companies are no longer tied to population-dense areas for strong talent. Tesla and HP have already announced big moves from California to Texas. I expect more companies to follow suit as the traditional work structure breaks down, and it becomes easier for employees to live and work from wherever they want.

Looking Forward

In the coming year, I see innovation in virtualization continuing. Although many technologies of this new lifestyle have been available for a while, the drive to combine them all and have consumers lineup to buy the latest innovations is new and here to stay. There is so much growth in this new segment. Startups are hard at work planning and building solutions.   

In terms of investment, I see big money going into connectivity and technologies to increase productivity for distributed workforce. Both entrepreneurs and VCs see the new digital economy’s value and will continue to fight to be part of it.

Whether we realize it or not, our lives have fundamentally changed forever. For some, the change has come with the loss of family members, friends, or jobs. For others, it has been a year full of opportunities, including the chance to spend more time with loved ones and reflect. I was lucky. I spent quality time with my family and observed life in a way I’ve never done before.   

The New Year is almost here. Whether you are on the front line of the pandemic, the backline of economic turmoil, or if you are reinventing your life entirely, 2021 will certainly have positive surprises. It has to…this is how we survive. Happy New Year.